Overtime Pay, the FLSA & “Time Theft” — Part I (Introduction and White-Collar Exemptions)

Who “owns” an employee’s time? Are you stealing from your employer if you take a personal call at work? What about if you check your personal email, or take some time to send out resumes?

Does it matter whether you’re an hourly worker who is entitled to overtime pay under the Fair Labor Standards Act (“FLSA”) or a salaried worker who is not?

Should the answers change as jobs increasingly require continuous electronic availability and permit flexible work hours and/or locations?

Since the FLSA was a central piece of the New Deal, do present economic circumstances require updating it to ensure that worker protections deemed essential to economic recovery during the Great Depression are not watered down, but able to play the same role today?

Our December 15, 2008, post on increasing employee theft in the recession included “time theft” by employees because many employers consider this a proper description of employee misuse of working time, such as attending to personal business while on the job (including looking for another job).

That post led to a blog post by Jon Jacobs at JobsintheMoney’s CareerWire blog entitled “Deconstructing Time Theft,” which quotes me and raises what Jon considers to be employer “theft” of employees’ time. (Jon was just a guest poster here on the subject of Wall Street bonuses in December).

I have my own views, as do Dawn and Jon, so we decided to start a series of posts on these issues with a three-way discussion.

Who’s Stealing Time From Whom?

Jon:

The whole concept of time theft by employees has always struck me as somewhere between insulting and deluded.

Employers routinely steal such huge quantities of personal time from employees of all levels that it’s hard to imagine anyone seriously asserting that a worker commits an infraction by conducting some Christmas shopping while not on an official “lunch break.” (Not that anyone working in an office gets official time off to have lunch, anyway. If you’re not one of those talented producers who usually lunches with clients, you very likely eat at your desk, working all the while.)

If the employee will be working until 8 or 9 in the evening, isn’t it the boss who benefits if they shop at their desk rather than bolt out at 5 to hit the stores?

Dawn:

I couldn’t agree more heartily. Having been on the salaried side of the desk, I’ve been flabbergasted at the lack of balance allowed between work and personal time. Many of today’s employers seem to think they have a right to be the absolute first priority in our lives, with family, friends, and even our health running a not-at-all-close second.

So what about all the time your employer “steals” from you — client calls during dinner, a pager beeping while you’re trying to spend time with your family, the requirement that you take your work laptop on vacation and check work email from your hotel?

George:

Hold it right there!

These concerns can only be properly discussed in the context of the particular job duties and the employer’s legal obligation to compensate the employee (including overtime pay if applicable) for the time you say the employer is “stealing” — and that which the employer says the employee is “stealing.”

I think you’re both assuming the employee isn’t entitled to get paid for those after hours phone calls and remote work — including overtime pay under the FLSA if he or she works over 40 hours in a week. That may or may not be true, depending on whether the employee is properly classified as exempt.

If the employee has a right to payment for this time, but the employer is violating this right, this can be considered “time theft” by the employer, and it is an enforcement and compliance issue. But if the employee has no right to payment and you feel he or she should have the right, then it sounds like you both see a need to change the law.

After we look at the law, I think you’ll agree with me that in the case of hourly workers, it’s entirely reasonable for employers to expect full attention to job duties while employees are “on the clock.” These employees are entitled to payment for all such time, and may even be racking up costly overtime; why shouldn’t employers expect them to be working?

As for FLSA-exempt salaried workers, the potentially 24-7 nature of the work is not a matter of employers “stealing time” from employees, unless the expectations were not made clear at the time of hiring or promotion into such a position. It’s simply part of the bargain for which the employer pays the salary. This is inherent in the FLSA’s definition of payment on a salary basis (which we’ll discuss in Part III), a definition requiring the kind of working-time flexibility both of you believe should be afforded to employees.

Lastly, there is a category of employees — nonexempt salaried — that is entitled to be paid on the same basis as hourly workers, so I feel the same way about them as about hourly workers, with one major difference: they are less likely to be paid as required by the FLSA because they are frequently misclassified as exempt.

Jon:

I agree that I was thinking of workers treated as exempt. If an employee is nonexempt, so they are actually getting paid for the time they shop or conduct other personal business, and the boss doesn’t know about and/or approve of it, then I have much less problem with calling that “time theft.”

But I still doubt employers pay anyone, even nonexempt workers, for that off-premises, outside-of-normal-office-hours time — the client calls, e-mail checking, etc.

George:

Maybe many don’t, but if they don’t they may very well be violating the law — depending on how the employee is properly classified under the FLSA. So let’s talk about the FLSA and what counts as working time for which employees must be paid under that law, including overtime pay if earned.

The FLSA’s Distinction Between Nonexempt Hourly Workers, Nonexempt Salaried Workers and Exempt Salaried Workers.

George:

The FLSA requires payment of minimum wage for all hours worked by a covered employee. It also requires overtime pay of at least 1 1/2 times the employee’s regular rate of pay for hours worked in excess of 40 in a workweek.

These requirements are subject to many exemptions, most quite narrowly drawn. The important exemptions for purposes of this discussion are the so-called “white-collar” exemptions.

Each of the “white-collar” exemptions has very specific requirements. In addition to payment on a salary basis, there are minimum pay and duties requirements. The following are the categories and very brief summaries of the duties requirements involved:

• Executive (primary duty is managing business or department or subdivision of it; customarily and regularly directs work of at least 2 full-time-equivalent employees; has authority to hire or fire other employees, or make suggestions and recommendations as to hiring, firing, advancement, promotion or other change of status of employees that receive particular weight)
• Administrative (primary duty is office or non-manual work directly related to management or general business operations of employer or employer’s customers; primary duty includes exercise of significant discretion and independent judgment)
• Learned Professional (primary duty is work requiring advanced knowledge, predominantly intellectual in character, which includes work requiring consistent exercise of discretion and judgment)
• Creative Professional (primary duty is work requiring invention, imagination, originality or talent in recognized field of artistic or creative endeavor)
• Computer (systems analyst, programmer, software engineer, or similarly skilled computer worker; primary duty is application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications; design, development, documentation, analysis, creation, testing or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications; design, documentation, testing, creation or modification of computer programs related to machine operating systems; or combination of these duties requiring same skill level)
• Outside Sales (primary duty is making sales or obtaining orders or contracts for services or use of facilities; and is customarily and regularly engaged away from employer’s premises)

Too many employers assume incorrectly that all salaried employees are exempt, failing to give the required careful consideration to the pay and duties requirements for the above exemptions.

Further, (as will be discussed in part II) too many employers fail to properly apply the salary basis requirement to employees whose pay and duties would otherwise allow them to be treated as exempt.

Dawn:

So what’s all that have to do with “stealing time”?

George:

Three things:

1. For nonexempt employees, hourly or salaried, the FLSA has quite generous provisions requiring compensation for certain types of nonproductive time, as will be discussed in Part II of this series.

   Of course, the FLSA is unforgiving as to nonpayment for any productive time.

   Therefore, I find it only fair for employers to prohibit employees from “stealing time,” so as to insist on productivity whenever work is available. Employers should not be accused of “stealing time” from employees for doing so — as long as they comply with the law, they are merely insisting on getting their money’s worth.

2. In contrast, employers that misclassify employees as exempt or fail to properly apply the salary basis requirement, while working them over 40 hours a week without paying overtime pay are definitely “stealing time” from employees.

   The salary basis requirement means exempt employees must be given more freedom and flexibility in their work hours, as you both believe should be allowed. This will be the subject of Part III of this series.

3. As to truly exempt employees, if you believe not paying them overtime pay is “stealing time” from them — despite the full implications of the salary basis requirement for this issue — you are making a case for reforming the FLSA.

   You would be in good company; this law was 60 years old in May 2008, the American workplace today is radically different than it was in 1938, and many others have commented that the FLSA is therefore in need of an overhaul. This will be the subject of Part IV of this series.

Dawn:

OK, George, I’m not convinced — yet. But I think I get what you’re saying and look forward to the rest of the series. So get to work — and no overtime pay for you!

Read More About the FLSA

*** The Employment Bookstore: Fair Labor Standards Act ***

The Wage & Hour Division of the U.S. Department of Labor, the agency that enforces the FLSA, has a tremendous collection of online resources relevant to the questions discussed above, including:

• Compliance Assistance – Fair Labor Standards Act (FLSA)
• Overtime Pay Index Page
• Brief Summary of Basic Principles of Overtime Pay under FLSA
• Fact Sheet on FLSA “White-Collar” Exemptions for Executive, Administrative, Professional, Computer & Outside Sales Employees